BRANDS AND BRANDING
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Copyright © The Economist Newspaper Ltd, 2003, 2009 Text copyright © Sameena Ahmad, Tony Allen, Simon Anholt, Patrick Barwise, Tom Blackett, Deborah Bowker, Jonathan Chajet, Rita Clifton, Deborah Doane, Iain Ellwood, Paul Feldwick, Jez Frampton, Giles Gibbons, Andy Hobsbawm, Jan Lindemann, Allan Poulter, Max Raison, John Simmons, Shaun Smith, 2009
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The authors
Preface
Patrick Barwise
Part 1 The case for brands
1 Introduction
Rita Clifton
2 What is a brand?
Tom Blackett
3 The financial value of brands
Jan Lindemann
4 The social value of brands
Giles Gibbons
5 What makes brands great
Jez Frampton
Part 2 Best practice in branding
6 Brand strategy
Iain Ellwood
7 Brand experience
Shaun Smith
8 Visual and verbal identity
Tony Allen and John Simmons
Plates
9 Brand communications
Paul Feldwick
10 The public relations perspective on branding
Deborah Bowker
11 Brand protection
Allan Poulter
Part 3 The future for brands
12 Globalisation and brands
Sameena Ahmad
13 Branding in Asia
Jonathan Chajet
14 From elephant to tiger: brands and branding in India
Max Raison
15 Branding places and nations
Simon Anholt
16 Brand 2.0: brands in a digital world
Andy Hobsbawm
17 An alternative perspective on brands: markets and morals
Deborah Doane
18 The future of brands
Rita Clifton
Index
Rita Clifton is a leading practitioner, author and commentator on brands and branding, and has worked with many of the world’s most successful companies. After graduating from Cambridge, she spent her early career in advertising, becoming vice-chairman and strategic director at Saatchi & Saatchi. A frequent speaker at conferences around the world, she is also a regular contributor on CNN and the BBC and to all the major broadsheets and business magazines. She edited The Future of Brands, and since 1997 has been CEO and then chairman in London of Interbrand, a global brand consultancy. She was made Visiting Professor at Henley Management College in 2006, and holds a number of non-executive directorships as well as being a trustee of the Worldwide Fund for Nature (WWF).
Sameena Ahmad has been The Economist’s consumer industries correspondent based in London and New York, and the Asia business and finance writer based in Hong Kong.
Tony Allen is CEO of brand consultancy Fortune Street. He has been a hands-on practitioner leading international branding projects for over 20 years. Before founding Fortune Street he was a director of corporate identity firm Newell and Sorrell, running its offices in Amsterdam and New York and working for clients including Rabobank, Barclays, Pharmacia & Upjohn and IBM. He then worked at Interbrand as CEO of its London office. His main area of expertise is branding in financial and professional services. He has extensive experience of brand development in emerging economies including Russia, Turkey and Azerbaijan.
Simon Anholt is an independent policy adviser, author and researcher who originated the concept of nation branding in 1996 and is today regarded as the leading authority on the identity and reputation of places. He is a member of the UK Foreign Office Public Diplomacy Board and has advised the governments of countries in Europe, Africa, Australasia, the Caribbean, East Asia and Latin America. He publishes the Anholt Nation Brands Index and Anholt City Brands Index, which use a panel of over 5m people in 20 countries to monitor global perceptions of 50 countries and cities. He is editor of a quarterly journal, Place Branding and Public Diplomacy, and his books include Brand New Justice, Brand America and Competitive Identity: the New Brand Management for Nations, Cities and Regions.
Patrick Barwise is emeritus professor of management and marketing at London Business School. He joined LBS in 1976, having spent his early career with IBM. He has published and consulted widely on management, marketing and media. His latest book, Simply Better, co-authored with Seán Meehan, won the American Marketing Association’s 2005 Berry-AMA Prize for the best recent book in marketing. In 2004, he led an independent review for the UK government of the BBC’s digital television services. He is a Fellow of both the Marketing Society and the Sunningdale Institute, a virtual academy on public service management. He is also a Council member (and previous deputy chairman) of Which?, the UK’s leading consumer organisation, and an experienced expert witness, having worked on commercial, tax and competition cases in London, Brussels, Paris, Cologne, and Washington.
Tom Blackett is a leading expert on brands and branding. He is the author of Trademarks and co-editor of Co-branding: the science of alliance and Brand Medicine, and has contributed to many other key texts about brands. He was with the Interbrand Group for 25 years, retiring as deputy chairman in March 2008, and during his career worked for many of the world’s leading brand owners. He continues to write about brands and to speak at conferences; he also acts as an expert witness in disputes concerning brands and has appeared in several prominent cases.
Deborah Bowker has 30 years’ experience in strategic planning, organisational communication, media and government relations. She has helped public- and private-sector organisations achieve improved reputation and performance through stakeholder analysis, issues management and brand-based public relations. Before forming Deborah Bowker Communications & Consulting she was a managing director at Burson-Marsteller where she led the US Corporate Practice. She was also director of Price-waterhouseCoopers’ Centre of Excellence for Strategic Communications and a technical adviser in communications and marketing planning to numerous PWC clients. She has served as an assistant postmaster general and vice-president at the US Postal Service and has directed major projects for USPS, a worldwide Olympic sponsorship and a national literacy programme. Her promotion of the Elvis postage stamp earned her a place in the Ad Age 100. She is a Sloan Fellow of the Massachusetts Institute of Technology.
Jonathan Chajet manages Interbrand’s business in China and oversees strategy for the Asia-Pacific region. He is an expert in brand strategy, business planning, market research, naming, visual identity, multimedia communications, packaging and employee training. He has helped create, enhance and manage some of the world’s most recognised brands including Adobe, Nestlé, Dow, Dell, Intel, Microsoft, Sony Playstation, Motorola, Nokia, Samsung and Wrigley. He was previously strategy director at Siegel & Gale and a management consultant at Oliver Wyman Management Consulting. He began his career in advertising at J. Walter Thompson, Rapp Collins Worldwide and the Arnell Group.
Deborah Doane is head of sustainable consumption at WWF-UK, leading innovative strategies to work towards an 80% reduction of our footprint by 2050, working with sectors such as food, housing and finance and with both local and national governments. For the past 15 years she has worked with NGOs, think-tanks and the private sector on ethical trading, human rights and sustainable development issues. She was director of the CORE (Corporate Responsibility) Coalition, campaigning for mandatory social and environmental reporting of all large companies. Previously, she was a programme director of Transforming Markets at the New Economics Foundation in London, and head of the Humanitarian Ombudsman Project, based in London and Geneva. She lectures at the London School of Economics and London Business School, and writes internationally on a range of CSR issues. She is on the Advisory Board on CSR for the Institute of Chartered Accountants of England and Wales and is chair of the Board of Anti-Apathy, which supports people who take creative approaches to social and environmental issues.
Iain Ellwood is head of consulting at the London office of Interbrand and leads the strategy, brand valuation and analytics, and brand engagement teams. Previously he worked at Prophet Management Consultancy, where he led a number of global strategic marketing engagements and helped grow the London office from start-up. He is a seasoned management consultant with over 15 years’ international experience, leading commercially effective engagements for clients such as British Airways, Barclays, Godrej, InterContinental Hotels, Mitsubishi, Orange, The Orient Express and Thomson Reuters. He is the author of Wonder Woman: Marketing Secrets for the Trillion Dollar Customer and The Essential Brand Book and a regular press commentator on marketing and branding issues. He is a Fellow of the Royal Society of Arts (FRSA), a member of the Chartered Institute of Marketing (MCIM) and a member of the Marketing Society.
Paul Feldwick worked for over 30 years at BMP, now DDB London, one of the agencies that invented Account Planning. He has been convenor of judges for the IPA Advertising Effectiveness Awards, chair of the APG and of the AQR, and is a fellow of the MRS and of the IPA. He is well known as a writer and speaker on advertising and brands; author of the book What is Brand Equity, Anyway; and three times winner of Best Paper at the MRS Conference – most recently in 2007 for the paper “Fifty Years Using the Wrong Model of TV Advertising” with Robert Heath. He is a visiting research fellow at the Centre for Research into Advertising and Consumption (CriAC) at the University of Bath School of Management. He now works as a consultant, advising agencies and advertisers on issues of communication, creativity and change. He also runs Fine Frenzy, a series of workshops which apply the experience of writing and reading poetry to organisational creativity and change.
Jez Frampton is the global CEO of Interbrand, responsible for managing the firm’s worldwide interests and enhancing the strategic and creative offering. Previously CEO of the firm in the UK, he has worked with many different clients including Budweiser, the BBC, IBM, Orange, Diageo, Carlsberg-Tetley, Nestlé, Marks and Spencer and McLaren Cars. He began his career in advertising while working in the United States. On returning to the UK, he moved into account planning at DMB&B and was executive planning director at Saatchi & Saatchi before joining Interbrand to manage the European interactive branding offer.
Giles Gibbons is the founder and CEO of Good Business, one of Europe’s leading corporate responsibility (CR) consultancies. He began his career at Cadbury Schweppes, serving in the marketing department on the development and launch of some of the UK’s most successful consumer products. He moved to advertising agency Saatchi & Saatchi, where he managed a wide range of domestic and international marketing campaigns. He then helped set up M&C Saatchi in 1995 before starting Good Business in 1997 with Steve Hilton. His first book, co-authored with Steve Hilton, is Good Business – Your World Needs You. Giles writes a monthly column for The Times on business and consumer trends in the social and environmental arena and is a regular speaker at corporate responsibility conferences. He plays an active role in the voluntary sector advising a number of charities and is currently vice-chair of We Are What We Do, a social enterprise focused on creating consumer-led social change.
Andy Hobsbawm established the first international web agency in 1994 and was a founding director of leading British new media company Online Magic that merged with Agency.com in 1997. Since 2005 he has been European chairman of Agency.com. He has been a weekly columnist about the new economy for the Financial Times, and published a widely acclaimed report, “10 Years On: The State of the Internet a decade after Mosaic”. He is currently writing Small is the Next Big Thing to be published by Atlantic Books. Andy was recognised by UK internet industry professionals as one of most influential 100 individuals over the past decade and also received a Special Lifetime Achievement Award in 2005. In Campaign magazine he has been voted New Media Innovator of the Year and named by industry peers as one of the most admired digital pioneers. Most recently, Andy co-founded an award-winning public service, Green Thing (Dothegreenthing.com), which inspires people to lead a greener life.
Jan Lindemann is a leading authority on value-based brand management and the impact of brands and other intangibles on shareholder value. He has advised many companies such as Samsung Electronics, ING and Prada Group on building leading global brands with sustainable economic value. He was global managing director of brand valuation at Interbrand, where he built the firm’s global brand valuation and analytics business. He established and managed the ranking of the Best Global Brands published annually in BusinessWeek. In his earlier career he was a mergers and acquisitions adviser for Chase Manhattan Bank. He has an MA in international economics and politics from the School of Advanced International Studies (SAIS) at Johns Hopkins University in Washington, DC.
Allan Poulter is a partner at Field Fisher Waterhouse LLP, a London-based law firm, practising within its Trade Marks and Brand Protection Group. He is qualified as a solicitor and as a registered trade mark attorney, and is nominated in the 2008 Euromoney Leading Trade Mark Law Practitioners. He manages the international trade mark portfolios of several household-name clients and has particular expertise in Community Trade Mark proceedings. He is a past chairman of the International Trade Mark Association’s publications board and is editor of the INTA publication on the Community Trade Mark. He is a regular speaker on intellectual property issues at conferences around the world.
Maxwell Raison is a strategy director at Interbrand London, which he joined in 2002 after more than five years as a planner with an integrated advertising agency. He has over ten years’ international experience and is responsible for the strategic direction of any project. He believes that the best results for any brand lie in the effective combination of rigour, insight and creativity. He has worked on projects with diverse clients, both national and international, including British Airways, Godrej, InterContinental Hotels and Resorts, Musgrave Group (winner Interbrand best work award 2006), McLaren (winner marketing research awards 2005), Procter & Gamble and the Royal Air Force. He has spoken at conferences and events and on radio and television, as well as writing articles in the marketing press and on brandchannel. A regular visitor to India, in 2007 he took a three-month break to explore the country.
John Simmons pioneered the discipline of verbal identity and has consulted for brands around the world such as Guinness, Unilever and Air Products. His books are valued as authoritative and engaging texts on the role of language in branding. He runs Dark Angels workshops in the UK and internationally. He is series editor of Great Brand Stories, and author of books in that series on Starbucks, Arsenal and Innocent Drinks. In 2007 John was writer-in-residence at King’s Cross tube station in London. Previously a director of Newell and Sorrell and then of Interbrand, he is now an independent consultant and director of The Writer.
Shaun Smith is a leading expert in helping organisations create and deliver customer experiences that differentiate their brands. A consultant to a wide range of organisations covering many different industry sectors, he is also author of several best-selling books: Managing the Customer Experience: Turning Customers into Advocates, Uncommon Practice: People Who Deliver a Great Brand Experience and, most recently, See, Feel, Think, Do: The Power of Instinct in Business. Shaun speaks internationally on these subjects and was recently voted one of the UK’s top business speakers.
The past few years have seen the apparent triumph of the brand concept; everyone from countries to political parties to individuals in organisations is now encouraged to think of themselves as a brand. At its best this means caring about, measuring and understanding how others see you, and adapting what you do to take account of it, without abandoning what you stand for. At its worst it means putting a cynical gloss or spin on your product or your actions to mislead or manipulate those you seek to exploit. These are hardly new ideas. What is new is the ubiquitous and often confused use of branding terminology to describe them.
This book aims to bring greater understanding into this complex and, to some, emotive area. Written by leading practitioners and analysts, it puts brands and branding into their historical context, describes current thinking and best practice, reviews the fast-changing patterns of brands in Asia and brands in an increasingly digital world, and ventures some thoughts about the future.
Brands are conceptually tricky. In the words of Jeremy Bullmore of WPP, they are “fiendishly complicated, elusive, slippery, half-real/half-virtual things. When CEOs try to think about brands, their brains hurt” (“Posh Spice and Persil”, The Brands Lecture, British Brands Group, December 5th 2001). Part of the confusion comes from the fact that the word “brand”, as a noun, is used in at least three separate but interrelated senses:
In most everyday use (for example, “which brand did you buy?”) a brand is a named product or service.
In some contexts (for example, “which brand shall we use for this new product?”) brands are trade marks.
In other contexts (for example, “how will this strengthen or weaken our brand?”), brand refers to customers’ and others’ beliefs and expectations about products and services sold under a specific trade mark or about the company which provides them; the standard term for this is brand equity, although in a corporate or business-to-business context, the old-fashioned term “reputation” is almost synonymous.
The use of the same word to mean three categorically different things does not aid clear thinking; and the thinking gets muddier when the anti-globalisation movement refers to “brands as bullies”, when really it is attacking the (mostly American) multinationals that own global consumer brands.
Brand valuation is an attempt to attribute part of the total value of a firm to brand equity. But brand equity – especially for a corporation, such as Microsoft, IBM or GE, as opposed to a product, such as Windows or Persil – is like reputation: it cannot be bought or sold. In contrast, a trade mark can be sold but has little inherent value apart from the associated brand equity.
This is not to deny that brands – that is, brand equity – can be an extremely important component of a firm’s value. Most successful businesses today are valued by the market at far more than the value of their tangible assets; as Jan Lindemann shows in Chapter 3, the proportion of the market value of major companies accounted for by intangibles, including brand equity, increased from less than 20% in 1975 to 80% in 2005. Brand equity, whether or not it is a separable asset to which we can assign a single, precise and valid financial value, is often the most important of these intangible assets. The financial markets now understand this and are starting to require senior management to act as good stewards of this crucial aspect of business performance. In other words, the emphasis on brands, which started in the late 1980s, has proved to be more than a passing fad, although the issues are evolving, as several of the essays in this book explain.
If senior managers are becoming brand stewards, what, then, are the issues they should think about in today’s market? As always in marketing, the specifics vary enormously, but there are a number of common themes.
To manage brand equity (or anything) successfully requires current, valid data. This includes diagnostic data about why the brand is where it is. Few brand owners do this well. Customer/consumer insight can come from many sources, including direct customer contact (“immersion”) as well as formal market research, customer database analysis, learning from operations (for example, complaints) and market intelligence. Of course, customer insights achieve nothing if they are not communicated openly – even when they challenge current assumptions and the resulting strategies – and then acted on. This is a big challenge in most organisations.
Another accountability issue relates to marketing metrics such as market share, customer loyalty, relative price and relative perceived quality. Managers should not only see these metrics regularly, and at a detailed level, but also report the main ones at a summary level to shareholders, apart from a few (such as customer complaints) which may be commercially sensitive. Resistance to accountability has been a systematic weakness of the marketing discipline, which is one of the reasons why finance tends to have more influence.
Including a range of marketing metrics in performance measurement systems such as the balanced scorecard (to complement short-term financial measures) should make it easier to maintain investment in activities that will build and develop brand equity. The main trends are a shift of resources away from traditional media advertising towards digital marketing, and a gradual concentration of resources on fewer, bigger brands, each capable of supporting more products. Relating back to measurement and accountability, managers should insist on quantitative evaluations (post-audits) of all brand investments even though these are unlikely to pin down the full long-term effects. The three criteria in a post-audit should be effectiveness (did the campaign reach its objectives?), efficiency (was it good value for money?) and learning (what have we learned which will help us do better in future?).
There is no consensus about the net social impact of businesses, brands or branding either in general or in particular cases. Nor is there consensus about the implications for public policy (for example, regulation, investment incentives) or for businesses themselves; but because of attacks from diverse groups (both consumerist and anti-consumerist) brand owners need a viewpoint on these issues. They may rightly argue that many of the criticisms of them are confused and ill-informed; that, for instance, the labour and environmental standards of multinationals in developing countries are usually higher than those of local competitors; and that those who criticise their involvement in these countries rarely spell out the likely consequences if that involvement were to cease. These arguments, however, are insufficient either to address the substantive issues or to win the battle for hearts and minds.
Brand owners today need to take account of the fact that these issues are starting to affect not only the brand choices of some consumers but also areas such as graduate recruitment and government relations. Further, in a digitally connected world anti-brand websites and e-mail campaigns can have a dramatic impact within a few days. In other words, it is now even more important for companies to be clear about what they and their brands stand for.
A recurrent theme in this book is that successful brand management goes well beyond the cosmetics of branding (brand name, packaging, advertising and so on). All great brands are built on a bedrock of trust derived from customers’ experience of buying and using products and services sold under the brand name. The resulting brand equity is then reinforced by brand communications in their mainly supporting role.
For some brands (mostly consumer packaged goods brands such as Coca-Cola and Marlboro), consumers find it hard to distinguish between different competing products in blind (unbranded) tests. In these cases, brand communications have a more central role, supported by great products and excellent distribution. A slightly different example is Intel, which owes some of its success to its Intel Inside “ingredient branding” strategy, but more to its products’ price-performance, its strategic alliance with Microsoft and its dominance of standards. But for most top brands in most categories – IBM, GE, Nokia, Toyota, McDonald’s, Google, Disney, American Express – brand equity comes primarily from customers’ experience of buying and using products and services sold under the brand name. This is why Seán Meehan and I urged companies to focus first on delivering the generic category benefits “simply better” than the competition in our book Simply Better: Winning and Keeping Customers by Delivering What Matters Most (Harvard Business School Press, 2004).
This sounds unexciting but it represents the biggest opportunity for senior management as brand stewards in most companies. After 30 years of total quality management (TQM), customer relationship management (CRM) and other such management prescriptions, there is still a huge gap between promise and delivery for most brands, especially service brands. In today’s increasingly digital world, consumers are more and more active and interconnected, so failure to deliver the brand promise is likely to be punished by the market faster and more toughly than ever. Technology can itself help companies reliably deliver, but the main issues are about the combination of human resources, operations, customer insight and marketing, company values and getting all the functions to work well together. This is extremely difficult and is why “simply better” companies such as Toyota and Procter & Gamble are sustainably successful. This challenge shows, however, why building a valuable brand can never be done by marketing people working alone.
Brands create customer value because they reduce both the effort and the risk of buying things, and therefore give suppliers an incentive to invest in quality and innovation. Branding can also enhance the customer’s experience aesthetically and psychologically. Today, there is far more interest in brands and recognition of their importance than there was 10 or 20 years ago, but there is still great ignorance and misunderstanding of many of the issues. This book is aimed at any open-minded person who seeks a better understanding of the social and financial value of brands, current best practice in branding, and some of the emerging issues around this important, complex and ever fascinating topic.
Patrick Barwise
Rita Clifton
In great part, this book, and its treatment of the subject of brands and branding, was originally inspired by a leader article, “Pro Logo”, which appeared in The Economist on September 8th 2001. The date of publication may give some clue as to why the subject did not generate as much follow-up debate as it might have done.
But there were, and are, other factors which subdued the kind of support that the article advocated for brands. The title “Pro Logo” was a witty response to the title and arguments in Naomi Klein’s 1999 book No Logo. That book had become an unofficial “bible” for the anti-capitalist and anti-globalisation movement, arguing that global brands had too much power and were the cause of a variety of evils and injustices in world society. The Economist article essentially advised Klein and her followers to grow up, and to recognise the importance of globalisation and brands to the economic and social development of all nations. Brands have been successful because people want them; and every organisation’s need to protect its reputation (and so its corporate value) is a rather efficient stimulus for them to behave well.
If the “anti” fervour of that time died down in the mid-2000s, the momentous financial events of 2008, and the impact on the “real” economy, look likely to challenge people’s views again about whether capitalism – and by implication the brands that symbolise it – should have the freedom to operate it has enjoyed.
This would be frustrating indeed. The problem is clearly not capitalism per se; without the energy and competition of markets, and the efficiency which professional businesses bring, there would be little relevant innovation and resources to help people’s lives – and, of course, little money to pay for schools, hospitals and civil society. No, it is simply that capitalism needs to be run more sustainably, in all its senses: economically, socially and environmentally. It is not exaggerating to say that this means every organisation should pay more central attention to its brands. Brands – whether product, service, retail or corporate, consumer or business-to-business – are demonstrably the most important and sustainable asset any organisation has. While founding individuals might die, buildings fall down, and products and technologies become obsolete, brands live on if they are managed well – and are allowed to play the central managing and organising role that they justify. Being managed well extends as far as making sure that people understand and help to deliver the brand across all operations – including being appraised and given incentives in line with the brand values. As a topical example, had the errant bankers and financiers been measured by and given incentives to build long-term sustainable brand value rather than short-term financial targets – or at least a balance of the two – the outcome may well have been different.
Financial services has always been one of the most challenging sectors so far as branding is concerned. The structure of most banks and financial institutions is not focused on the company’s brand promise to the customer, but rather on financial products and services. Even today, brand management, if it exists, is generally viewed as a separate activity, usually as the province of the marketing department and usually to do with advertising and communication materials. As an example of this, at a recent financial services conference for senior executives, there was a changeover from one speaker to the next. The first had talked about the short-term prospects for the financial markets, and the second was to talk about the value of branding. Before the second speaker had even started to speak, there was an exodus of around a quarter of the delegates. Clearly, many felt that the brand issue was either nothing to do with them or not important.
This echoed the sentiment of a recent letter from a FTSE company chief executive in response to an approach from a brand consultancy. No one could blame the CEO for rebuffing such an approach from a supplier, but it was the reason given that was illuminating: “Branding is not our main preoccupation at the moment.” The letter was polite, but the implication was clear. Basically, in the face of difficult market conditions, the CEO was preoccupied with “more important” things such as, presumably, cutting costs and restructuring. In contrast, branding was, to him, a discretionary cost and most probably to do with expensive logo-twiddling. To equate “brand” with such superficial cosmetics is the equivalent of saying that people are really only the sum of their name, face and clothes – or, indeed, saying that “at the moment, we’re not interested in our customers”, or “we’re not interested in generating sustainable wealth”. Quite apart from anything else, a good understanding of where your brand adds most value ensures better decisions on where to make savings when necessary, as well as more efficient use of resources to keep the things that will keep any company going: a loyal customer, and some security of demand.
It is interesting that Warren Buffett, the world’s most famous (and least sentimental) investor, told a group of investors in Germany that brand is the most important factor in deciding where to invest.1 Traditionally, a strong balance sheet is the first criterion, but Buffett put that in third place. His second criterion was a good management team. But in first place he put brand. Even in hard times, brand is the key to protection and growth.
Yet even if that is accepted in theory, there is clearly still a strong need to explain and champion to a wider audience what brands and branding can really do, just how central they are to sustainable wealth creation – and, of course, how to achieve that in practice. As one chief executive noted, those who move from the traditional idea that the brand is about advertising and marketing to using the brand as the organising idea in their corporate strategy, to touch and inform everything they and their people make, do and say, may find that they “have made more progress as a business than we achieved in the previous ten years”.
Recognising the different attitudes towards brands, and the different levels of understanding and practice, it seemed important for this book to air and explore a range of angles, both positive and negative, for a range of audiences. This is indeed what the book has set out to do, as is reflected in the chapter subjects and contributors.
However, we should be clear that there is a central tenet for this book, whether it is reflected in each individual contribution or not. The brand is the most important and sustainable asset of any organisation – whether a product- or service-based corporation or a not-for-profit concern – and it should be the central organising principle behind every decision and every action. Any organisation wanting to add value to day-to-day process and cost needs to think of itself as a brand.
Certainly, all the hard economic evidence is there for the central importance of the brand. While the brand clearly belongs in the “intangible” assets of an organisation, this hardly makes its economic contribution and importance any less real. For example, the intangible element of the combined market capitalisation of Standard & Poor’s 500 companies has increased to around 80%, compared with some 30% 20 years ago, and it is likely to grow even further as tangible distinctions between businesses become less sustainable. The brand element of that combined market value amounts to around one-third of the total, which confirms the brand as the most important single corporate asset. Globally, brands are estimated to account for approximately one-third of all wealth; and that is just looking at their commercial definition. Some of the world’s most recognised and influential brands are, of course, those of not-for-profit organisations, such as Oxfam and the Red Cross. This is an aspect of “global brands” all too rarely considered in the public debate about brands and branding.
The economic importance of brands on a national and international stage is undeniable. The 100 most valuable brands in 2008 were worth over $1.2 trillion, which would make them the 11th biggest “country” in the world in terms of GDP, ahead of India and just behind Brazil. If the financial clout wielded by these companies makes some commentators nervous, it should not. The owners of brands are also highly accountable institutions. If a brand delivers what it promises, behaves in a responsible fashion, and continues to innovate and add value, people will continue to vote for it with their wallets, their respect and even their affection. If, however, a brand begins to take its position for granted and becomes complacent, greedy or less scrupulous in its corporate practices, people will stop voting for it, with potentially disastrous effects for the brand and its owner.
In a word-processed, all-seeing digital world, where the ghosts of corporate malpractice are never laid to rest, there is every incentive for companies to behave well. One of the ironies of the anti-globalisation movement, in its original targeting of global brands, was the failure to acknowledge that the importance of brand reputation provides the strongest incentive for a company to do everything to protect the reputation of its brand, its most valuable corporate asset. If the ability to increase the value of that asset is the “carrot” for companies, then the “stick” is the knowledge of how worthless the once-proud names of companies such as Enron have now become.
From an investment perspective, the brand provides a more reliable and stable indicator of the future health of a business. Inspection of brand value, equity measures and audience relationships will give a more complete and realistic basis for underlying value than short-term financial results, which often reflect short-term priorities. A study by Harvard and South Carolina universities compared the financial performance of the world’s most valuable 100 brands with the average of the Morgan Stanley Capital Index and the Standard & Poor’s 500. The dramatic difference in performance gives further quantified substance to what is qualitatively obvious. Strong brands mean more return, for less risk.
Brands, however, are not simply economic entities. Apart from the obvious social benefits of wealth creation in improvements in standards of living both nationally and internationally, there are less recognised social effects and benefits. Most of the world’s most valuable brands have been around for more than 50 years. Brands are the most stable and sustainable assets in business, living on long after the passing of most management teams, offices, technological breakthroughs and short-term economic troughs. Clearly, to deliver this sustainable wealth, they need to be managed properly. But achieving sustainable wealth means more reliable income for companies, which means more reliable earnings. All this in turn leads to more security and stability of employment, which in itself is an important social benefit.
Related to the social perspective, there is also strong political significance in brands. Apart from the fact that political parties all over the world now employ some professional branding practices, there have been many articles and studies on issues such as “Brand America”. These have looked at the role and global dominance of American brands, and at how these are being used as political symbols, for good or ill. Although initially the presence of McDonald’s was greeted enthusiastically in the former Soviet Union as symbolic of Russia’s new found “liberation”, more recently McDonald’s has been targeted for anti-American demonstrations, despite its best efforts at emphasising local management structures and locally sensitive approaches to tailoring product offers and practices.
An interesting development that goes beyond the idea of boycotting has been the launch of competitive initiatives such as Mecca-Cola, introduced in 2002 by Tawfik Mathlouthi, a French entrepreneur. This is another demonstration of the highest level of symbolic and economic importance of brands. The strongest brands have always worked at the level of personal identity. So even if Mecca-Cola has not been a substantial financial challenge to the $67 billion brand value of Coca-Cola, it highlighted new possibilities for actively expressing fundamental differences of view, with the nicely ironic touch that the “alternative statement” brand has almost exactly the same physical characteristics as the mainstream one. However, before commentators get too carried away in this area, the nature of competition in brands has always meant competition between product characteristics and broader brand values, image and associations. Whatever the motivation for launching a competitive brand, its long-term success will depend on its ability to satisfy a critical mass of customers on product, service and image grounds.
But a powerful political point about brands is their ability to cross borders, and potentially to bind people and cultures together more quickly and effectively than national governments, or the bureaucratic wheels of international law, ever could.
TV used to be called the second superpower; the internet is the new, alive and often mobile TV “screen” that has all but taken this role. Whereas it used to take decades and centuries for one culture to seep into another, now not only can lasting and transforming images of different cultures be transferred in seconds, but lasting connections can also be made. America’s dominance of the TV, internet and media markets has ensured that American brands (and, indeed, Brand America) still dominate global markets in their turn; and although the production and servicing facilities for brands benefit from regional flexibility, those that own the brands own the greatest wealth. One of the reasons that China has not been satisfied with being the “factory of the world” is that it recognises that “he who owns the brand owns the wealth” and is busy trying to build its own world-class brands. However, any successful brand, of any provenance, must continue to understand and anticipate changes in its audiences to remain successful. It is beyond irony that the internet – essentially an American invention and “supplied” by America – has become such an instrument of challenge to its brands and its institutions and has helped to open a new world order.
This book will explore these and other issues, such as the changing power base between West and East, and how Asian brands are emerging as serious global players. What is certain, however, is that the strongest brands have, in their lifetime, already seen off seismic changes in political, social and economic circumstances, and continue to thrive through deserving trust and long-term relationships. Brands of all kinds do have extraordinary power: economic power, political power and social power. It is no exaggeration to say that brands have the power to change people’s lives, and indeed the world. For this claim, think not just about the “one free world” images introduced by Coca-Cola advertising over the years, and the universality of the Red Cross, but also consider the more recent emergence of Microsoft, Nokia and Google as inspirers and enablers of social change.
If brands are so demonstrably powerful, and since the definition and benefit of brands embrace every type of business and organisation, the question to ask is why every business and organisation would not want to concentrate their resources, structure and financial accountability on this most important asset. Indeed, there is a clear need for organisations to be consistently preoccupied with maintaining the sustainable competitive advantage offered by the brand. The clarity of focus that a strong brand positioning gives organisations will always create more effectiveness, efficiency and competitive advantage across all operations; and from a pragmatic financial perspective, research among investment communities confirms that clarity of strategy is one of the first criteria for judging companies.
So why are brands sometimes not taken as seriously as the data, and even high-profile supporters, show us they should be? There seem to be several potential explanations.
Perhaps the first and most obvious is a lack of full understanding among some senior managers about what successful branding really is. If branding is treated as a cosmetic exercise only, and regarded merely as a new name/logo, stationery and possibly a new advertising campaign, it will have only a superficial effect at best. Indeed, if this “cosmetic” approach is applied in an effort to make a bad or confused business look more attractive, it is easy to see why these so-called “rebranding” exercises encourage such cynicism. Reputation is, after all, reality with a lag effect. Branding needs to start with a clear point of view on what an organisation should be about and how it will deliver sustainable competitive advantage; then it is about organising all product, service and corporate operations to deliver that. The visual (and verbal) elements of branding should, of course, then symbolise that difference, lodge it memorably in people’s minds and protect it in law through the trade mark.
The second explanation for why branding is sometimes not central in the corporate agenda seems to be to do with terminology. The term “brand” has now permeated just about every aspect of society, and can be as easily applied to utilities, charities, football teams and even government initiatives as it has been in the past to packaged goods. Yet there still seems to be a residual and stubborn belief that brands are relevant only to consumer goods and commerce. Clearly, this is nonsense when every organisation has “consumers” of some kind; furthermore, some of the world’s most valuable brands are business to business, but that does not make them any less “consumers”. However, rather than get deeply embroiled in the broader meanings of consumption, it is probably more helpful to talk about audiences for brands today. These can be consuming audiences, influencing audiences or internal audiences. All these audiences need to be engaged by the brand – again, whether it is a product, service, corporate or not-for-profit brand – for it to fulfil its potential.
If there are still those who would say “yes, but why does it have to be called brand?”, it is worth remembering that every successful business and organisation needs to be set up and organised around a distinctive idea of some kind. To distinguish itself effectively and efficiently from other organisations, it is helpful to have some kind of shorthand: visual or verbal symbols, perhaps an icon that can be registered and protected. To make up another term for all this would seem perverse, as branding is already in existence. Rather, it is worth exploring why some people and organisations might have this aversion or misunderstanding and tackle the root cause.
In the case of some arts and charitable organisations, there can be a problem with commercial overtones; for commercial organisations working in the business-to-business arena, or in heavy or technical services, there may be concerns that branding feels too soft and intangible to be relevant. With the former, it is a harsh truth of the new arts and not-for-profit worlds that they are competing for talent, funding, supporters and audiences, and need to focus their efforts and investment with the effectiveness and efficiency that brand discipline brings. With the latter, there is nothing “soft” about the financial value that strong branding brings, in every and any sector; nor is it “soft” to use all possible competitive levers to gain every customer in a hypercompetitive international market. Price will always be a factor in choice. But acting like a commodity, rather than a trusted and differentiated brand, will eventually lead only to the lower-price road to perdition.